China Convergence Fund A Sub-Fund of Value Partners Intelligent Funds NAV per unit : Class A USD - USD150.10 Fund size : USD299.0 million

31 March 2017 • China Convergence Fund (The “Fund”) primarily invests in A and B shares listed on the stock exchanges of Shanghai and Shenzhen as well as in H shares listed in Hong Kong. • The Fund invests in China and therefore is subject to emerging market risks. Generally, investments in emerging markets are more volatile than investments in developed markets due to additional risks relating to political, social, economic and regulatory uncertainty. • The Fund is also subject to concentration risk due to its concentration in China-related companies. Adverse development in such region may affect the value of the underlying securities in which the Fund invests. • The Fund may directly invest in A Shares and other eligible securities through the qualified foreign institutional investors (“QFII”) quota. Investors will be subject to certain risks including repatriation risk, custodial risk, regulatory risk. In addition, the QFII policy and rules are subject to change. All these may adversely impact the Fund. • The Fund may also invest in derivatives which can involve material risks, e.g. counterparty default risk, insolvency or liquidity risk, and may expose the Fund to significant losses. • should not make investment decision on the basis of this material alone. Please read the explanatory memorandum for details and risk factors.

Investment objective Performance update 1 Class A MSCI China The fund The fund aims to provide unitholders with long-term capital appreciation USD Index 2 Class Z by investing primarily in A and B shares listed on the stock exchanges of One month +3.8% +2.1% +3.7% Shanghai and Shenzhen, as well as H shares listed in Hong Kong. Year-to-date +12.5% +12.9% +12.2% Note: On inception, in Jul 2000, the fund’s objective was to invest primarily in One year +14.4% +19.7% +16.6% B shares. In Jul 2001, the mandate was extended to include H shares. In Mar 2005, the mandate was further extended to include China A shares. Three years +27.5% +20.5% +31.7% Five years +29.1% +31.2% N/A Since launch +1,401.0% +187.4% +33.0% 1 Performance since launch Annualized return ^ +17.6% +6.5% +8.1%

% Annualized volatility ^ 25.8% 26.7% 19.8% 2,000 The fund (Class A, USD) MSCI China Index3 1,600 NAVs & codes +1,401.0% Classes NAV ISIN Bloomberg 1,200 Class A USD 150.10 KYG9317Q1047 VAPAICB KY Class A AUD Hedged 10.04 KYG9317Q1385 VAPAAHD KY 800 Class A CAD Hedged 10.16 KYG9317Q1468 VAPACAH KY Class A NZD Hedged 11.33 KYG9317Q1534 VAPANZH KY 400 Class Z USD 13.30 KYG9317Q1203 VAPAICZ KY +187.4% 0 -200

2000 2002 2004 2006 2008 2010 2012 2014 2016

The fund – Class A USD: Monthly performance from 1 Jan 2009 to 31 Mar 2017 1 Year Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Annual 2009 -3.0% -2.3% +12.4% +11.6% +17.9% +4.3% +11.9% -7.0% +4.6% +8.4% +6.8% +1.5% +87.1% 2010 -6.1% +2.4% +6.2% +2.3% -4.8% +1.6% +3.9% +1.6% +10.8% +4.5% +1.2% -2.6% +21.3% 2011 -3.2% -0.9% +4.8% +2.2% -2.5% -2.4% +1.5% -7.3% -19.4% +13.5% -7.6% -0.3% -22.4% 2012 +7.6% +6.6% -5.5% +1.0% -8.4% -3.8% -3.5% +0.6% +5.8% +2.7% +0.1% +7.4% +9.3% 2013 +7.5% -2.0% -2.9% -0.6% +2.7% -9.9% +3.5% +1.8% +2.2% +3.9% +5.6% -1.8% +9.2% 2014 -5.6% +1.0% -3.6% -1.0% +1.2% +3.4% +8.8% +1.3% -1.2% +3.2% +1.6% +5.4% +14.6% 2015 +1.8% +1.3% +6.7% +19.8% +1.7% -8.1% -12.6% -12.5% +1.5% +5.5% -3.8% +2.4% -0.5% 2016 -16.6% -0.9% +8.5% -2.1% -2.5% -1.1% +4.8% +6.7% +0.4% -1.8% +1.1% -3.5% -8.7% 2017 (YTD) +5.9% +2.3% +3.8% +12.5%

^ Annualized return and volatility are calculated from inception on 14 Jul 2000. Volatility is a measure of the theoretical risk in terms of standard deviation; in general, the lower the number, the less risky the investment, and vice versa.

9th Floor, Nexxus Building, 41 Connaught Road Central, Hong Kong Investor hotline: (852) 2143 0688 Email: [email protected] www.valuepartners-group.com Follow us on China Convergence Fund | 31 March 2017

Top 10 securities holdings Fund facts Name Industry 3 % Manager: Value Partners Limited Tencent Holdings Ltd. Software & services 6.8 Base currency: USD China South Publishing and Media 5.0 Trustee: Bank of Bermuda (Cayman) Limited Media Group Co., Ltd. Custodian: HSBC Institutional Trust Services (Asia) Limited China Petroleum & Energy 3.7 Launch date: Class A USD - 14 Jul 2000 Chemical Corporation Class A AUD Hedged - 27 Oct 2015 Inner Mongolia Yili Industrial Food, beverage & tobacco 3.6 Class A CAD Hedged - 7 Jan 2016 Group Co., Ltd. Class A NZD Hedged - 7 Jan 2016 Yibin Co., Ltd. Food, beverage & tobacco 3.5 Class Z - 24 Jul 2013 Gree Electric Appliances, Inc. Consumer durables & apparel 3.4 Unit price is published daily in the South China Morning Post, the Hong Kong of Zhuhai Economic Journal and the Hong Kong Economic Times. Co., Ltd. Food, beverage & tobacco 3.2 Alibaba Group Holding Ltd Software & services 3.1 Fee structure Beijing Yanjing Brewery Food, beverage & tobacco 2.6 Co., Ltd. Class A Class Z USD10,000 Ping An Insurance (Group) Insurance 2.6 Minimum subscription USD10,000,000 Co. of China, Ltd. or equivalent Minimum subsequent USD5,000 These stocks constitute 38% of the fund. USD100,000 subscription or equivalent Subscription fee Up to 5% Portfolio characteristics Management fee 1.25% p.a. 0.75% p.a. As at 31 Mar 2017 2017 4 Performance fee 7 15% of profit (High-on-high principle) Price/earnings ratio 13.7 times Redemption fee Nil Price/book ratio 1.7 times Dealing day Daily Dividend yield 2.5% Senior investment staff Geographical exposure by listing 5 Chairman & Co-Chief Investment Officer: Cheah Cheng Hye China A Shares 36% Deputy Chairman & Co-Chief Investment Officer: Louis So H Shares 22% Deputy Chief Investment Officer: Renee Hung Hong Kong 17% Senior Investment Director: Norman Ho, CFA Red Chips 9% Investment Directors: Gordon Ip, CFA; Kenny Tjan, CFA; Michelle Yu, CFA; China B Shares 7% Yu Xiao Bo Cash 6 3% Senior Fund Managers: Kelly Chung, CFA; Doris Ho; Glenda Hsia; Philip Li, CFA; Kai Mak United States 3% Taiwan 2% Others 1%

Short exposure includes: Hong Kong, -0.6%.

Sector exposure 3, 5

Consumer discretionary 24% Consumer staples 18% Information technology 14% Health care 9% Industrials 9% Energy 6% Insurance 5% Utilities 4% Cash 6 3% Banks 2% Materials 2% Other financials 2% Others 2%

Total short exposure is -0.6%. Short exposure includes: Consumer discretionary, -0.3% and Real estate, -0.3%. 1. Source: HSBC Institutional Trust Services (Asia) Limited and Bloomberg, data as of 31 Mar 2017, in USD, NAV to NAV, with dividends reinvested. Performance data is net of all fees. 2. Starting from Jul 2009, the MSCI China Index will be used as the reference index for the entire history of the fund. Hang Seng H Shares Index, Shanghai Composite Index and Shenzhen Composite Index were no longer shown for comparison. 3. Classification is based on Global Industry Classification Standard (GICS). 4. The profile is based on market consensus forecast as derived from S&P Capital IQ and Bloomberg. Harmonic mean methodology is applied to calculate the forecast P/E ratio and P/B ratio. Note that the manager’s internal estimates may differ significantly from S&P Capital IQ and Bloomberg estimates. 5. Exposure refers to net exposure (long exposure minus short exposure). Due to rounding, percentages shown may not add up to 100%. 6. Cash refers to net cash on hand excluding cash for collaterals and margins. 7. Performance fee will only be charged if the NAV at the end of the financial year or upon realization of units exceeds the “high watermark”, which is the all-time year-end high of the fund’s NAV. If in any one year, the fund suffers a loss, no performance fee can be charged in subsequent years until the loss is recovered fully (the high-on-high principle). The Fund is not registered under the United States Securities Act of 1933, as amended (“the Securities Act”) or the securities laws of any of the states of the United States. The units of the Fund (“Units”) may not be offered, sold or delivered directly or indirectly in the United States or to or for the account or benefit of any “US Person” except pursuant to an exemption with the consent of the Trustee and/or the Manager of the Fund in a transaction which does not result in a violation of applicable United States federal or state securities laws. The Units are subject to restrictions on transferability and resale and may not be transferred or resold except as permitted under the Securities Act and applicable state securities laws, pursuant to registration or exemption therefrom, as well as in accordance with the requirements set forth in the Explanatory Memorandum and Supplemental Disclosure Statement for US Persons (“Memorandum”). Investors should be aware that they will be required to bear the financial risks of this investment for an indefinite period of time. The Units are suitable only for sophisticated investors who do not require immediate liquidity for their investments, for whom an investment in the Fund does not constitute a complete investment program and who fully understand and are able to bear the loss of their investment in the Fund. The Fund’s investment program, by its nature, may be considered to involve a substantial degree of risk. Prospective investors should not subscribe for Units unless satisfied that he or she and his or her investment representative have asked for and received all information which would enable him or her or both of them to evaluate the merits and risks of the proposed investment. The Units are not, and are not expected to be, liquid, except as described in the Memorandum. Offering materials for the offering of the Units have not been filed with or approved or disapproved by the United States Securities and Exchange Commission or any other state or federal regulatory authority, nor has any such regulatory authority passed upon or endorsed the merits of this offering or passed upon the accuracy or completeness of any offering materials. Any representation to the contrary is unlawful. This material does not constitute an offer or solicitation in any state or other jurisdiction in which an offer or solicitation is not authorized. No representations or warranties of any kind are intended or should be inferred with respect to the economic return or the tax consequences from an investment in the Fund. No assurance can be given that existing laws will not be CCF_US_201703 changed or interpreted adversely. Prospective investors are not to construe this material as legal or tax advice. Each investor should consult his or her own counsel and accountant for Followadvice concerning us on the various legal, tax and economic considerations relating to his or her investment. 2

China Convergence Fund Commentary / First Quarter 2017

 China Convergence Fund (The “Fund”) primarily invests in A and B shares listed on the stock exchanges of Shanghai and Shenzhen as well as in H shares listed in Hong Kong.  The Fund invests in China and therefore is subject to emerging market risks. Generally, investments in emerging markets are more volatile than investments in developed markets due to additional risks relating to political, social, economic and regulatory uncertainty.  The Fund is also subject to concentration risk due to its concentration in China-related companies. Adverse development in such region may affect the value of the underlying securities in which the Fund invests.  The Fund may directly invest in A Shares and other eligible securities through the qualified foreign institutional investors (“QFII”) quota.  Investors will be subject to certain risks including repatriation risk, custodial risk, regulatory risk. In addition, the QFII policy and rules are subject to change. All these may adversely impact the Fund.  The Fund may also invest in derivatives which can involve material risks, e.g. counterparty default risk, insolvency or liquidity risk, and may expose the Fund to significant losses.  You should not make investment decision on the basis of this material alone. Please read the explanatory memorandum for details and risk factors.

In the first quarter of 2017, Hong Kong and China stocks delivered one of their best first-quarter performances underpinned by solid macro data, supportive southbound flows, corporate earnings upward revision and a stable Renminbi (“RMB”).

In the first three months of 2017, China Convergence Fund returned 12.5% on the back of positive earnings of our stock picks. For reference, the Hang Seng Index rose 9.9% (in USD) while the MSCI China Index and Shanghai Composite Index gained 12.9% and 4.7% (in USD) during the period, respectively.

Market overview

Signs of confidence are returning to China. Indeed, first-quarter macro data this year continued to show that the world’s second-largest economy is gaining momentum with benign inflation pressure. Activity in China’s manufacturing sector picked up further in March 2017 with the official Purchasing Managers' Index (“PMI”) rose for the second consecutive month to 51.8, the highest since April 2012, supported by China’s increased efforts in providing fiscal stimulus which started in 2016, as well as improving domestic and export demand.

Positive messages were also delivered at the 2017 National People’s Congress (“NPC”) in March. Presenting the government work report at the NPC, Premier Li Keqiang noted that growth stability and currency stability are the top priorities for the year. Amid the transition from a “pro-growth” stance in 2016 to “growth stability” in 2017, China set its growth target for 2017 at a more reasonable level at 6.5% and we believe this is achievable. With the recent macro improvement, this has also created more room for policymakers to tackle financial excesses and over capacity. Against this backdrop, China is expected to maintain a more prudent monetary policy and will focus on risk control measures, such as financial regulation strengthening and the speed up of supply-side reform. While deleveraging will constrain liquidity in the market, we believe these initiatives are positive to China over the long run.

From a market flow perspective, the southbound flows from mainland China into Hong Kong have been robust in the quarter and supported Chinese equities listed in Hong Kong. In our view, the southbound flows shall remain constructive over the long run, underpinned by attractive valuations of H-share companies, demand for currency diversification and the increasing launch of Stock Connect-related products in mainland China.

While RMB depreciation was a concern for many investors in 2016, People’s Bank of China Governor Zhou Xiaochuan said at the NPC that the RMB will likely be broadly stable this year. Given China’s pledge to sustain the global status of RMB in the international monetary system, drastic RMB movement is unlikely in our view. In February 2017, China’s forex reserves rose the first time in eight months and returned to above US$3 trillion, signaling China’s first net capital inflow in more than two years. The turnaround, a result of tight capital outflow restrictions, economic recovery and higher domestic interest rates, has moderated investor concerns on China.

9th Floor, Nexxus Building, 41 Connaught Road Central, Hong Kong Hotline: (852) 2143 0688 Email: [email protected] www.valuepartners-group.com

The first quarter of 2017 painted a positive picture for Chinese equities driven by one of the best earnings per share (“EPS”) growth upgrade. Currently, the consensus estimates for 2017 EPS for the MSCI China Index is 13%, a big leap from -2.5% in 2016. We believe the Chinese government’s stance on growth stability will provide a sustainable favourable market environment for equity investors and we will continue to uncover attractive value companies that exhibit strong profitability and earnings sustainability within the Greater China region.

Corporate update

Value Partners’ robust investment process and research capabilities continued to earn the industry’s recognition. Entering 2017, Value Partners has been named “Best Fund Provider – Greater China Equity” 1 in the Asian Private Banker Asset Management Awards for Excellence 2017, marking the third consecutive year that we received this renowned title.

Fund performance is always the primary focus of Value Partners. We continue to plough back our profits to invest in our infrastructure and enhance our research and investment capabilities. Looking forward, we will embark on new initiatives to unearth values in the Asian markets.

Value Partners Investment Team 20 April 2017

1. Based on performance and achievements for 2016.

All performance figures are sourced from HSBC Institutional Trust Services (Asia) Limited and Bloomberg (Data computed in US$ terms on NAV-to-NAV basis with dividends reinvested) as at 31 March 2017. Performance data is net of all fees.

Individual stock performance is not indicative of fund performance.

The views expressed are the views of Value Partners Limited only and are subject to change based on market and other conditions. The information provided does not constitute investment advice and it should not be relied on as such. All material has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. This material contains certain statements that may be deemed forward-looking statements. Please note that any such statements are not guarantees of any future performance and actual results or developments may differ materially from those projected.

Investors should note that investment involves risk. The price of units may go down as well as up and past performance is not indicative of future results. Investors should read the explanatory memorandum for details and risk factors in particular those associated with investment in emerging markets. This commentary has not been reviewed by the Securities and Futures Commission. Issuer: Value Partners Limited.

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China Convergence Fund: 5 biggest holdings of securities as at 31 March 2017

Stock Industry Valuation Remarks (2017 Estimates) China Petroleum & Energy Price: HKD6.30 China Petroleum & Chemical is one of the largest integrated energy and chemical companies Chemical P/E: 11.9x in China. Its comprehensive business portfolio allows it to better hedge against risks and (Code: 386 HK) P/B: 0.9x provides higher earnings visibility. The company is on the back of steady improvements in Yield: 4.6% return on equity (ROE) and profitability, and coupled with potential catalysts from state- Market cap: owned enterprise (SOE) reforms in the oil and gas industry. US$100.4 billion China South Publishing Media Price: CNY17.97 China South Publishing and Media Group is both the largest-scale listed publishing and and Media Group P/E: 14.7x media group in China and the most extensive in terms of the number of areas it operates in. It (Code: 601098 CH) P/B: 2.2x engages in publishing, distribution, printing, and media businesses in China. The company. Yield: 2.1% has been well-recognized for its achievements in recent years. The targeting of TV and other Market cap: media outside book publishing reflects the company’s overall strategy expand across media US$4.7 billion and content formats as one of the media giants. Inner Mongolia Yili Dairy product Price: CNY18.91 Inner Mongolia Yili Industrial (“Yili”) is a leading dairy group in China engaging in Industrial manufacturer P/E: 19.5x sectors including liquid milk, ice cream, infant milk powder and yoghurt. Since 2010, its (Code: 600887 CH) P/B: 4.2x management has been committed to channel optimization and product upgrade, leading to Yield: 2.9% continuous operational improvement. Its market share is expected to grow further as Yili is Market cap: identified as a major beneficiary of the policy-driven industry consolidation. US$16.7 billion Tencent Holdings Internet Price: HKD222.80 Tencent Holdings (“Tencent”) is a leading provider of online games, premium messaging (Code: 700 HK) P/E: 32.8x services, internet value added services, and advertising and ecommerce services in China. Its P/B: 8.7x instant messenger "QQ" has the largest online community base with over 800 million Market cap: Yield: 0.3% accounts. Leveraging its large active user base, it offers good long-term monetization US$271.7 billion potential.

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Stock Industry Valuation Remarks (2017 Estimates) White spirit Price: CNY43.00 Wuliangye Yibin (“Wuliangye”) is one of the leading producers in China. The (Code: 000858 CH) manufacturer P/E: 18.9x company’s earnings growth will benefit from the booming industry sentiment, continued P/B: 3.1x price hikes, enhanced marketing efforts and improved operating efficiency following Market cap: Yield: 2.6% adjustments to management and ongoing state-owned enterprise reform. US$23.7 billion

Note: The above investments made up 23% of China Convergence Fund as at 31 March 2017. The stock prices are based on the closing of 31 March 2017.

Individual stock performance/yield is not necessarily indicative of overall fund performance.

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